Baker and Shamir Make Progress on Peace Front, but Not on Loans

Israel and the United States appeared to make some progress toward a Middle East peace conference this week but remained at loggerheads on the issue of U.S. guarantees for $10 billion in loans Israel is seeking for immigrant absorption.

That was the situation after more than five hours of talks here Monday and Tuesday between Prime Minister Yitzhak Shamir and U.S. Secretary of State James Baker.

Both men described the talks as “good and friendly.”

Shamir told reporters after their final 90-minute session Tuesday morning that “some progress” had been made on issues pertaining to the Middle East peace conference the United States and Soviet Union would like to convene next month.

Yet a shadow clouds the entire enterprise. Persistent procedural differences over the conference combined with the Bush administration’s determination to delay action on Israel’s loan request until January has reignited a long-simmering revolt on the far-right wing of Shamir’s coalition government, which opposes peace negotiations with the Arab states and especially the Palestinians.

There was mounting speculation this week that threats by the right-wing parties to defect could provide the pressure — or pretext — for Shamir’s government to resign and call for early elections. That would put the entire peace process on hold for an indefinite period.

Nevertheless, Israeli officials who briefed the local news media on the Shamir-Baker talks maintained that the conference issues are all but wrapped up to Israel’s satisfaction.

‘MINOR MATTERS’ STILL UNRESOLVED

Foreign Minister David Levy, consistently upbeat in his public pronouncements, said most of the major issues were satisfactorily formulated in the draft of a U.S. letter of assurances to Israel.

What remained to be resolved were “minor matters” that Israel wants included, Levy said.

Shamir and Baker said there would be further talks soon, but they announced no date.

Baker left Israel at noon Tuesday for Egypt and was scheduled to visit Jordan and Syria on what is his seventh diplomatic swing through the region since the end of the Persian Gulf War.

His final meeting with Shamir was attended by Levy, Defense Minister Moshe Arens and a retinue of aides on both sides.

While it was in progress, U.S. officials held parallel talks with a local Palestinian delegation, headed by Faisal Husseini, at Husseini’s East Jerusalem home.

It was a follow-up to the meeting Baker had with the same group Monday evening, directly after his three-hour session with Shamir and other senior Israeli ministers.

The East Jerusalem talks also focused on an evolving U.S. letter of assurances to the Palestinians. The reported language of the letters to Israel and the Palestinians has led some observers to suggest that Baker may have made contradictory promises to both sides.

According to unofficial reports, the letter to Israel explicitly excludes the Palestine Liberation Organization from the peace process.

It upholds Israel’s fight; not to negotiate with any party it rejects. It also stipulates that the conference plenary will not reconvene after its ceremonial opening without the explicit consent of all parties.

That condition has been demanded by Israel, which insists the conference serve only as a ceremonial curtain-raiser for separate, direct bilateral talks between Israel and the Arab states and the Palestinians.

The letter of assurance was also said to reiterate a pledge originally made by President Gerald Ford that the United States would take into account Israel’s security needs in the Golan Heights.

No details were released of the draft given to the Palestinians. Reports here said the Palestinians were inclined to forego their demand that East Jerusalem Arabs must be represented at the peace talks, a condition unacceptable to Israel.

But the proposed American letter would contain explicit language to the effect that Washington regards East Jerusalem as occupied territory and considers the principle of withdrawal, as stated in U.N. Security Council Resolution 242, to apply on all fronts.

USSR EXPECTED TO RESUME TIES

After Tuesday’s meeting Husseini flew immediately to London, where, he said, he would communicate the letter’s contents to “Palestinian decision-makers,” meaning apparently the PLO.

Attention is expected to shift to the Palestine National Council, the PLO’s so-called parliament-in-exile, which is scheduled to meet early next week.

The proposed U.S. letter of assurances may be introduced for approval. If that occurs, the “heat” will be on Israel to reach agreement with Baker on its U.S. letter of assurance.

One bright note this week was the announcement Tuesday by the new Soviet foreign minister, Boris Pankin, that he will definitely visit the Middle East, including Israel, when the conference modalities are finally worked out.

His remarks appeared to confirm indications that Moscow is prepared to resume full diplomatic relations with Israel before the conference opens.

But on the darker side, it was plain from Shamir’s and Baker’s brief appearance before reporters and camera crews Tuesday morning that their governments had not resolved the highly emotional issue of the loan guarantees.

At a Sept. 12 White House news conference, Bush, pounding his fist on the lectern, angrily repeated his request that Congress delay action on the Israeli request for 120 days, until January. He vowed to veto any loan guarantees bill passed before then.

To accede to Israel’s demand for swift action could jeopardize the delicate peace process, the president insisted.

His anger was obviously aimed at some 1,000 pro-Israel activists from all over the country who converged on Washington that day to lobby Con- gress to act on Israel’s request in defiance of the president’s wishes.

On Sunday, Israeli Cabinet members reacted angrily to the president’s stand. One of them, Rehavam Ze’evi of the extremist Moledet party, even called Bush a liar and an anti-Semite.

His statement was quickly repudiated by Defense Minister Arens and denounced in strong terms by Shoshana Cardin, chairman of the Conference of Presidents of Major American Jewish Organizations.

NO COMMITMENT ON $10 BILLION

It is clear that the confrontation is one of the most serious ever between Israel and its most powerful ally. According to some observers, it stems in no small measure from the Bush administration’s antipathy toward Shamir.

The Israelis now are painfully aware that the president will not budge from his position, and there is insufficient support in Congress to force his hand.

Jerusalem therefore will have to reconcile itself to a 120-day delay in action but may receive assurances that when the waiting period is up, the administration will back the loan guarantees. At present, it is not formally committed to do so.

Baker, who seemed to have distanced himself from the president’s confrontational tactics, said here that he presented Israel with certain proposals for its consideration and heard certain proposals from the Israelis.

Subsequent leaks suggested that the U.S. proposals were essentially the six points set down by Bush last week in meetings with key congressional leaders.

They include administration promises to provide a legislative vehicle for the loan guarantees, to seek no further delay beyond January, to support Israel’s immigrant absorption effort generally, to help reconcile the U.S. cost of the loans with federal budget reduction constraints and to offset any financial losses Israel might incur as a result of the 120-day delay.

But the proposal apparently includes no specific administration commitment to provide guarantees for $10 billion in loans, which Israel would seek from commercial banks.